{"id":7873,"date":"2016-06-23T07:31:45","date_gmt":"2016-06-23T14:31:45","guid":{"rendered":"http:\/\/www.keytlaw.com\/azllclaw\/?p=7873"},"modified":"2017-01-15T11:00:19","modified_gmt":"2017-01-15T18:00:19","slug":"member-fraud","status":"publish","type":"post","link":"https:\/\/www.keytlaw.com\/azllclaw\/2016\/06\/member-fraud\/","title":{"rendered":"Member Fraudulently Amends Articles of Organization to Remove Other Member"},"content":{"rendered":"

From time to time a member of an Arizona LLC calls and tells me that another member of the LLC filed an amendment to the Articles of Organization with the Arizona Corporation Commission that removed the caller as a member of the LLC without the caller’s knowledge or consent.\u00a0 There was no legal basis to file the amendment.<\/p>\n

The caller always asks “what can I do?”\u00a0 The simple answer is the caller should prepare and file another amendment to the Articles of Organization to correct the removal of the caller as a member.\u00a0 This solution, however, is only a temporary band aid.\u00a0 It does not solve the fundamental problem which is the members cannot get along.<\/p>\n

Unfortunately this scenario is an all too common problem.\u00a0 The Arizona Corporation Commission is, in actuality, a mere filing service.\u00a0 If a person submits a document for filing and it satisfies the ACC’s filing requirements, the ACC will file the document.\u00a0 The ACC does not confirm or verify that the information set forth in a document is correct.\u00a0 Many times when members of an Arizona LLC can not agree on the management of the LLC one of the members will file an amendment to the Articles of Organization that removes another member without any legal basis for the removal.<\/p>\n

People who file false documents with the ACC are usually unaware that they could be committing a felony.\u00a0 Arizona Revised Statutes Section 29-613.A<\/a> states:<\/p>\n

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\u201cA person who . . . signs any articles, statement, report, application or other document filed with the [Arizona Corporation] commission that is known to the person as false in any material respect is guilty of a class 4 felony.\u201d<\/p>\n<\/blockquote>\n

The bottom line is that when this happens the members need to consummate a “company divorce,” i.e., a legal termination of their relationship as members of the same LLC.\u00a0 The best solution occurs if the members agree on the terms and conditions of their company divorce and they sign documents that evidence their agreement.\u00a0 If the members cannot agree, they have two options:<\/p>\n